457: To contribute or not to contribute - that is the question

[ryanf1475]

Hello gurus, I come again for advice, as your previous answers have been amazing. Because I have been working overseas and claiming the Foreign Earned Income Exclusion, I have now found myself with an interesting option: If I want to exclude all of my income (I make less than the limit), that would be a huge benefit of course, but I would need to cancel my 457 deferrals, as they are only allowable to the amount of my includable income. The advantage here would be that I could invest the money I would otherwise spend on 19K of taxable income (~2K?). OR, if I contribute to my 457 (max it out), I will need to include 19K of income (and pay taxes on it). The obvious advantage is allowing the deferrals to grow tax free; however, this would ALSO allow me to contribute to my personal Roth IRA as well. So in effect, I would pay taxes on 19K but put ~25K into Roth accounts. If you were 36 years old, what would you do?

 

[LdiJ]

Hello gurus, I come again for advice, as your previous answers have been amazing. Because I have been working overseas and claiming the Foreign Earned Income Exclusion, I have now found myself with an interesting option: If I want to exclude all of my income (I make less than the limit), that would be a huge benefit of course, but I would need to cancel my 457 deferrals, as they are only allowable to the amount of my includable income. The advantage here would be that I could invest the money I would otherwise spend on 19K of taxable income (~2K?). OR, if I contribute to my 457 (max it out), I will need to include 19K of income (and pay taxes on it). The obvious advantage is allowing the money to grow tax free; however, this would also allow me to contribute to my personal IRA as well. So in effect, I would pay taxes on 19K but put ~25K into Roth accounts. If you were 36 years old, what would you do?

I think that investing in Roth accounts can be a very good thing for a 36 year old.